Carry Trade Law and Legal Definition

The carry trade involves financing or carrying the purchase of mortgage-backed securities with funds borrowed through repurchase agreements from the money market. This strategy attempts to take advantage of the differences between the rates of repurchase agreements, which have lower short-term interest rates, and the mortgage-backed securities, which have higher long-term interest rates. [In re N.Y. Cmty. Bancorp, Inc. Sec. Litig., 448 F. Supp. 2d 466, 470 (E.D.N.Y. 2006)].